The stock market had a rough start in 2025, with the S&P 500 dropping 10% due to investors’ recession fears.
Despite a brief stock rally in mid-March, economic uncertainty and trade tensions have set the ground for a disappointing end to a quarter.
The market projections also became bearish. The initially projected modest 2,4% growth in 2025 was replaced by a 2,9% plunge, marking the second downturn in three years. However, 2026 is expected to bring a rebound.
According to data presented by Stocklytics.com, after enduring the challenges of 2025, the global stock market is set for an 8% surge in 2026.
Investors have been on a bumpy ride over the last year. After record-breaking stock performances in 2023 and early 2024, the year’s second half brought significant volatility. All tech giants saw their stock values nosedive due to the US government’s expanded export restrictions on AI chips to China, expectations of future interest rate cuts, mixed earnings reports, and growing concerns about stock valuations.
Unfortunately, 2025 brought another hit. Escalating trade tensions have had a major impact on investors’ confidence, causing a $4-trillion drop in market value. The Federal Reserve’s anticipated interest rate cuts, delayed until later in the year, and a significant drop in IPOs, mergers, and acquisitions only further fueled market volatility.
The perfect storm of negative events caused market forecasts for 2025 to shift into the red. Last year, Statista had projected the global stock market would grow by 2,4% and reach a total market capitalization of $127,4-trillion. However, the latest revision forecasted a 2,9% decline, the second market contraction in three years, bringing the total market cap down by $3-trillion to $128-trillion.
Despite this setback, Statista expects 2026 to be a year of recovery. After the 2025 plunge, the global stock market cap is forecasted to grow by a robust 8,1%, similar to growth rates in 2022 and 2023, and hit a record $138,4-trillion in 2026. In comparison, that would represent an increase of $6,5-trillion from 2024 levels and nearly $8-trillion more than in 2021.
While the global stock market will grow by 8% in 2026, overvalued stocks remain a huge concern, raising questions about market stability. In 2025, the Buffett Indicator, a key metric comparing total stock market capitalization to GDP, will hit 112.4, signaling moderate overvaluation. However, this figure is expected to climb to 115.7 in 2026, pushing the market into significantly overvalued territory.
The US market, home to the world’s largest stock exchanges, will see even more dramatic figures. Statista data show the Buffett Index for the US stock market will rise from an already high 183 in 2025 to 188 in 2026. Despite forecasted corrections, the UK and Japanese markets will also stay overvalued. According to Statista, Japan’s index will drop from 146 to 140, while the UK’s will decline from 131 to 124. On the other hand, the Chinese stock market will remain the only undervalued among the top five, but its index will increase, rising from 67.3 to 73 year-over-year.